The ripple effect of COVID-19 presents a myriad of financial challenges and in a Q&A interview with Lawyer Monthly, Trustee Howard Ehrenberg implores owners to review specific constraints and limitations in debt and loan documents to avoid defaulting.
“Owners need to take advantage of credit relief options, such as forbearance, deferrals, moratoriums, extensions, debt restructuring/forgiveness,” Ehrenberg explains. “This gives businesses runway to assess cash, extend payables and identify other sources of liquidity.”
As a strategy to mitigate any financial stress, Ehrenberg outlined three steps: 1) preserve cash; 2) contact vendors, landlords and others to negotiate payment extensions; and 3) apply for all applicable government assistance programs, including the Paycheck Protection Program loan administered by the Small Business Administration.
Ehrenberg also noted that while many companies will try to evoke force majeure, allowing owners to be relieved of their contractual duties due to unforeseeable events, there’s little evidence of this clause being honored by landlords, banks and others.
Read his full Q&A (pg.44) here.